Seniors and pre-retirees generally form a major percentage of people who buy annuities. This is so because people start thinking about earning a constant income post retirement at this age. On the other hand, at this seniority, most people also have enough money to invest in annuities and other financial products. There is a huge debate among agent and financial circles regarding the ethics of selling equity indexed annuities to seniors.
Many insurance agents themselves feel that selling indexed annuities with long lock-in periods and low caps to seniors is a little unethical. The high commissions that you get with equity indexed annuities further add to this belief. Your decision to sell indexed annuities to seniors is all your own, but you also need to know and make your prospects aware about some of the main benefits of indexed annuities. While fixed annuities are a good product any day, equity indexed annuities could be the right choice for seniors who have concerns related to:
Inflation: Investing in equities can go a long way in offsetting the effects of inflation. By advising seniors to invest in indexed annuities with asset allocation portfolios matched with their risk bearing capabilities, you let them gain potential growth without their having to get directly involved with trading equities. However, it is important to tell your prospects about the amount of risk involved without exaggerating the results that could be expected.
Taxation: Most clients who have enough money to invest are out looking for options to save on tax. By investing in tax deferred index annuities, your client might be able to save a lot of money that would otherwise have gone as tax on mutual funds, stocks, deposits and savings. In spite of the fact that processing fees and charges related with equity indexed annuities are high, equity indexed annuities can provide an ultimate yield that will be much larger than other fixed annuities. Along with telling your leads about the tax benefits that they can get with a particular indexed annuity, you should also make it a point to inform them about the conditions where taxes are applicable like withdrawals and income generation from annuity assets.
High Profits: Since the stock markets are going through a very lean phase right now, it might be the perfect time to invest in an equity index annuity because in the long run, the prices of stocks are bound to go up. Index annuity buyers who are ready to wait for at least five to ten years can expect unprecedented profits by investing in equities when they are at an all time low.
Outliving Annuity Payments: Many equity indexed annuities nowadays come with a guaranteed living withdrawal benefit clause. This can be a very lucrative option for seniors who want to invest in an annuity that lasts throughout their life time, no matter how long it is. You can sell such index annuities to seniors who worry about outliving their money.
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